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Gas strategy: government could loosen carbon budgets to allow dash for gas

05 Dec 2012, 16:50

Ros Donald

The UK government may lower its carbon cutting ambitions if the
EU carbon trading emissions cap doesn't tighten in the near future,
according to the Department of Energy and Climate Change's new gas
strategy. Less ambitious carbon budgets could in turn create leeway
for the construction of up to 37 gigawatts of new gas plant.

Chancellor George Osborne announced the
strategy today in tandem with the Treasury's Autumn statement.
The document contains a new suggestion that the UK could construct
an extra 40 new gas plants - or 37 gigawatts of gas power -
which first came to light when the measures were
leaked yesterday.

In an
interview, the UK's decarbonisation advisor, the Committee on
Climate Change (CCC), warned a dash for gas would break the UK's
carbon budgets, which are designed to help it meet its legal
emissions reduction targets. But on reading the strategy, it
emerges the government would justify the measure by refusing to go
further than other countries in the EU.

The CCC creates budgets to limit UK emissions over five-year
periods. They are designed to ensure the UK cuts greenhouse gas
emissions by 80 per cent by 2050 to meet its legally binding
targets under the
Climate Change Act. The committee calculates the budget
allowances with reference to the number of emissions credits the UK
buys through the ETS and other international emissions trading
systems.

The gas strategy document says:

"The UK is pushing for the EU to show
more ambition by moving to a tighter 2020 emissions target, which,
in turn, will drive a more stringent EU ETS cap."

But if by 2014, the UK's domestic commitments place it "on a
different trajectory" from the one agreed in the EU under the ETS,
the government will "revise up [the] budget [...] to align it with
the actual EU trajectory".

In other words, if it looks like the UK is cutting emissions
faster than its neighbours, the UK will change its targets to match
theirs.

Three scenarios

But why is the government talking about changing its carbon
budgets? The key lies in a new scenario included in the strategy,
which could allow for a dash for gas in the UK.

The strategy models three different scenarios. In one, the
emissions intensity of the UK power sector is reduced to 50g of
carbon dioxide per Kilowatt hour - as the CCC
recommends is necessary
if the UK is to hit legal targets. In the second, emissions are
reduced to 100gCO2/KWh. In the third, emissions intensity is
reduced to 200gCO2/KWh by 2030.

This graph from the strategy shows the amount of gas generation
over time for the three different scenarios in the strategy:

Different amounts of new gas are constructed in the three
scenarios. In the 50g scenario, 19GW of new gas power stations
would be built between now and 2030. In the 100g scenario, 26GW, or
about 30 new power stations would be built. In the 200g scenario,
37GW, or about 40 new power stations would be constructed between
now and 2030.

But the CCC says the high gas scenario would break the UK's carbon
budgets as well as creating new energy costs and price increases.
Head of the committee David Kennedy says in a statement:

"Early decarbonisation of the power
sector should be plan A - and the dash for gas Plan Z."

He says it will be "essential" to ensure that the government's
overhaul of the electricity sector aims to achieve a carbon
intensity of 50g of carbon dioxide per Kilowatt hour by investing
in low carbon technologies. A dash for gas, he warns, would "raise
long term costs and risks".

Changing the budgets

The report acknowledges that if the UK builds more gas plant, its
emissions will not go down as fast. It says:

"A lower level of decarbonisation, i.e.
not reducing emissions by as much, will mean that CCGTs will
generate more [emissions] compared to a higher level of
decarbonisation."

But it has a solution - change the carbon budgets to allow for
more emissions from power generation:

"Gas could play a more extensive role,
with higher load factors, should the fourth Carbon Budget be
revised upwards. Including capacity commissioned this year (or
expected to be commissioned shortly), this could lead to a need for
investment in up to 37 GW of new gas capacity by 2030."

That way, the UK can build more gas and keep within the budgets
- although presumably only because the government would
increase its allowances. And given that the budgets are designed to
bring UK emissions within the scope of its 2050 target, it would
have to do some serious cutting to make up for its higher emissions
over the fifth budget.

The Treasury goes it alone

The announcement has Ed Davey's stamp on it, but it appears the
new scenario has more to do with the Treasury than with Davey's
department. According to the
BBC, DECC originally intended to include the gas strategy in
its new energy bill - and to limit the role of gas according to the
advice of the CCC. But the chancellor demanded that the Treasury
launch a separate gas strategy. A DECC source told the
BBC:

"This is the chancellor's personal
obsession. We have just let him get on with it. We don't really
object."

Davey has been keen to emphasise that the UK won't be following
Osborne's scenario. From the UN climate talks in Doha he told the
Telegraph that the gas strategy will stick to the central
scenario - which allows for 30 new plants, not 40 as the treasury
would have it. He says:

"The Chancellor and I and other
ministers looked at all aspects of energy policy, the gas
generation strategy is a DECC document. It's a DECC strategy. It's
something we own."